Ownership, funding key to prosperity for minorities and women
Rogers, the Gordon and Llura Gund Family Distinguished
P rofessor of Entrepreneurship
the prominence of the Fortune 500 companies, America’s
economic health depends upon the success of everyday entrepreneurs.
economy is predominantly composed of smaller businesses. Of
some 22 million total companies, only 70,000 have more than
100 employees, so it’s crucial that these small- and
medium-sized firms remain strong. It’s crucial for our
economic health and for the health of our communities, since
employment and crime display an inverse relationship: People
with decent economic prospects tend to stay out of jail. (This
remains true despite recent corporate scandals.)
associated with minority and women entrepreneurs are especially
interesting, both with respect to that sector’s growth
and its hurdles.
million minority-owned firms in the United States generate
annual revenues of $700 billion, an increase of 126 percent
over the past decade. This revenue translates into more jobs
for minorities. Research conducted by Wayne State University
Professor Timothy Bates shows that the average white-owned
firm located in a predominantly minority community employs
a work force that is 35 percent minority. In contrast, a minority-owned
firm in a minority community will employ a work force that
is more than 85 percent minority.
minority entrepreneurs succeed, they also increase the
chances of other minorities to do the same.
study examined non-minority communities, the findings indicated
that white-owned firms employed fewer than 15 percent minorities,
while minority-owned firms in these same locations hired 72
this study concludes that ownership of the firm is more important
to minority job creation than is the firm’s location,
facts that are evident when we look at Chicago’s Austin
community. Austin is a poor community of some 100,000 residents,
nearly all of whom are minorities. Austin is also home to
more than 6,000 small, white-owned manufacturing firms. Of
the 96,000 employees of these firms, only 6 percent are minorities.
a concerted effort to keep minorities out? I would be naïve
to suggest this possibility has no merit. But I believe this
phenomenon is primarily due to the fact that hiring at small-
and medium-sized companies is often based on referrals of
family and friends of the existing employees or the owner.
Naturally, those people referred tend to resemble the firm’s
demographics. So when minority entrepreneurs succeed, they
also increase the chances of other minorities to do the same.
dynamics hold true for women entrepreneurs, who own more than
nine million companies in the United States, generating annual
revenues of $3.6 trillion. These firms, with 27.5 million
total workers, employ 100 percent more people than do the
combined Fortune 500 firms. And women-owned businesses create
jobs for other women — at rates greater than 50 percent.
these scenarios are complicated by gross funding disparities
facing women and minority entrepreneurs. In 1997, for example,
banks and other institutions loaned more than $250 billion
to small- and medium-sized businesses. Less than 10 percent
of that money went to firms owned by minorities or women.
Over the past decade, venture capitalists have invested more
than $50 billion in entrepreneurs, but less than 5 percent
of that funding has gone to women or minorities.
these roadblocks, minority and women entrepreneurs continue
to grow their ranks. In the past decade, their numbers have
increased 64 percent and 25 percent, respectively. Some 70
percent of all new startups are owned by women, and minority
women entrepreneurs have posted an incredible 153 percent
increase in the last 10 years.
challenges clearly remain, it is evident that the entrepreneurial
spirit is stronger than ever in the minority and women business
community. And this fact lends strength to the entire U.S.